TORONTO, March 27,
2023 /CNW/ - (TSX: LUN) (Nasdaq Stockholm: LUMI)
Lundin Mining Corporation ("Lundin Mining" or the "Company")
is pleased to announce it has entered into a binding purchase
agreement with JX Nippon Mining & Metals Corporation and
certain of its subsidiaries (collectively, "JX"), to acquire
fifty-one percent (51%) of the issued and outstanding equity of SCM
Minera Lumina Copper Chile ("Lumina Copper"), a wholly owned
subsidiary of JX which operates the Caserones copper-molybdenum
mine ("Caserones") located in Chile (the "Acquisition"). JX will receive
upfront cash consideration from Lundin Mining of $800 million, and in addition, $150 million in deferred cash consideration will
be payable by Lundin Mining in installments over a six-year period
following the closing date. Lundin Mining will also have the right
to acquire up to an additional 19% interest in Caserones for
$350 million over a five-year period
commencing on the first anniversary of the date of closing.
Additional details are provided below.
Lundin Mining will host a conference call and webcast at
8:00 am ET, 14:00 CET on March 28,
2023, to discuss the Acquisition. Call details are outlined
at the end of this news release.
Acquisition Rationale
- Aligned with strategic goals – delivers a large-scale,
long-life copper operation with favorable cash flow generation,
complementing Lundin Mining's existing operations and overall
copper-dominant portfolio of high-quality base metal mines.
- Enhances copper production profile – increases exposure
to a highly desired base metal and on a pro forma basis would have
increased Lundin Mining's 2022 copper production by
50%1. This will further solidify Lundin Mining's
position as a meaningful copper producer globally.
- Immediate free cash flow contribution – underpinned by
competitive cash costs and modest capital expenditures, and
significantly accretive to operating cash flow per share
metrics.
- Continued balance sheet strength – remains a high
priority for Lundin Mining, and financial leverage continues to be
low in relation to internal targets and to comparable mining peers.
The Company retains healthy liquidity headroom on its $1.75 billion revolving facility after accounting
for the upfront cash consideration for the Acquisition.
- Upside opportunities – through expected operational
improvements under Lundin Mining's management, including initiating
drill programs. The producing operation comes with a mineral
property package in a highly prospective district and Lundin Mining
believes significant exploration potential exists.
- Potential synergies – proximity to Lundin Mining's
Candelaria operations (~160 km from Caserones) introduces
opportunities to realize additional savings and implement effective
supply, logistical and management strategies.
- Chile is a well-established
Tier-1 mining jurisdiction – Lundin Mining has made a
significant investment in the region and the country, and can
leverage its operating experience, as well as local regulatory and
community relationships.
- Attractive call option – clear path for Lundin Mining to
increase ownership up to 70% and strengthen its presence in a
leading copper mining district.
- Strengthening partnerships – JX has extensive
operational knowledge, which will help Lundin Mining to realize the
full potential of the Caserones mining operation.
__________________________________________
|
1 Based on
2022 actual production as reported by the Company and Caserones and
is on a 100% basis.
|
Commenting on the transaction, Peter
Rockandel, CEO, said, "Upon closing of the Acquisition of
Caserones, we add another long-life copper mine of material size
and with significant growth potential to our portfolio, in a region
in which we have considerable knowledge and experience. The
Caserones team has achieved meaningful operational improvements in
recent years, and we will work to unlock additional upside through
our strong technical resources and existing presence in the region.
The initial controlling interest increases our exposure to what we
believe is a growing top-tier copper mining district. We retain the
option to further increase our ownership over the next few years at
an attractive price. The Acquisition further solidifies Lundin
Mining's position as a growing global producer of copper as the
world shifts to a lower carbon future."
Caserones Overview
Caserones is a significant porphyry copper-molybdenum deposit in
the Atacama Region (Region III) of the northern Chilean Andean
Cordillera, situated between the Maricunga and El Indio belts and
is part of the emerging Vicuña copper district. It is located
approximately 160 km southeast of Copiapó, 9 km from the border
with Argentina, and at an altitude
of approximately 4,500 meters above sea level. The operation
produces copper and molybdenum concentrates from a traditional open
pit mine and conventional sulphide flotation plant, as well as
copper cathode from a dump leach, solvent extraction and
electrowinning plant. First copper cathode was produced in 2013,
followed by copper and molybdenum concentrates in 2014. Climatic
conditions and the physiology of the high-cordillera of the Chilean
Andes support mining operations throughout the year.
Asset Highlights:
- Mine operations – traditional open-pit truck and shovel
operation utilizing thirty-three haul trucks loaded by a
combination of two electric rope shovels, two hydraulic shovels,
and two large front-end loaders.
- Processing – conventional crush, grind and flotation
processing with a nominal capacity of 105
k tonnes per day ("tpd"), producing both copper in
concentrates and molybdenum in concentrates, as well as a solvent
extraction and electrowinning (SX-EW) plant and leaching facilities
for processing oxide and low-grade sulphide ore with a production
capacity of 34.5 kt of cathode per year (96 tpd). In 2022, the
concentrator plant produced 109.1 kt of copper in concentrate. In
addition, 15.1 kt of copper cathodes and 3.1 kt of molybdenum in
concentrate was produced.
- Concentrate – clean copper concentrate with minimal
impurities. Similarly, molybdenum concentrates meet the quality
standards for global sales.
- Operating cash costs2 – C1 cash
costs of $2.22/lb and all-in
sustaining cash costs (AISC) of $2.54/lb was reported by Caserones for 2022.
- Mineral Reserves and Resources – a "historical estimate"
(as defined in National Instrument 43-101 – Standards of Disclosure
for Mineral Projects ("NI 43-101")) for copper Proven and Probable
Mineral Reserves of 892.1 Mt at an average grade of 0.33% copper
containing approximately 2.9 Mt of copper and historical estimates
for copper Measured and Indicated Mineral Resources of 1.595 Bt at
an average grade of 0.29% copper containing 4.583 Mt of copper. A
qualified person has not done sufficient work to classify these
historical estimates as current Mineral Resources or Mineral
Reserves and Lundin Mining is not treating the historical estimate
as current Mineral Resources or Mineral Reserves. See below for
further detail.
- Tailings facility (TSF) – tailings are managed in two
separate facilities. The flotation tailings from the concentrator
plant are classified into coarse and fine fractions. The La Brea
TSF, located approximately 9 km west of the concentration plant,
receives the fines and the coarse fractions are sent to the El
Tambo sand stacking facility immediately adjacent to the
concentrator plant. Due diligence was performed on the tailings
facilities and related infrastructure, led by Lundin Mining's
Technical Services Group.
- High-quality infrastructure – well-established
supporting infrastructure includes a 160 km road to Copiapó, access
to maritime transportation channels for exporting concentrates and
cathodes, a 220 kV power line connection to the national grid, and
water rights permitted for operational use.
- Communities and employees – experienced workforce and
community relations team in place enabling good relationships with
local stakeholders.
___________________________________________
|
2 Cash cost
and AISC are non-GAAP measures and, although calculated according
to accepted industry practice, these are not a standardized measure
under IFRS and therefore the disclosed cash costs and ASIC may not
be directly comparable to other base metal producers. C1 Cash Cost
is calculated from total costs and expenditures as reported by SCM
by removing the following costs: idle capacity, tailings
construction, desalinated water, by-product credits (Mo & Ag),
and exploration expenses and adding TC/RC to the resulting figure.
Costs and expenditures are comprised of the following costs: salary
expenses, spare parts, consumables, electricity, subcontracts,
general expenses, desalinated water, freight & port, and net
smelting return as reported by Lumina Copper. C1 Cash Costs (in US$
millions) is divided by total copper production to produce C1 Cash
Costs per pound of copper (on a by-product basis). C1 Cash
Costs (in US$ millions) plus sustaining capital costs is divided by
total copper production to produce ASIC per pound of copper (on a
by-product basis). See the reconciliation at the end of this press
release.
|
Transaction Overview
The purchase price for the Acquisition will be paid in cash and
will consist of an upfront payment of $800
million subject to any adjustments from the effective locked
box date of December 31, 2022, until
closing. The remainder of the cash consideration, of $150 million shall be paid to JX as follows: (A)
$50 million shall be paid in five
installments of $10 million on the
anniversary of the transaction closing date in each of 2024, 2025,
2026, 2027 and 2028; and (B) $100
million shall be paid on the anniversary of the closing date
in 2029, subject to certain adjustments as provided for in the
purchase agreement. The Acquisition is based on Lumina Copper
containing zero debt and zero cash as of the locked box date of
December 31, 2022. The purchase price
is expected to be funded from Lundin Mining's revolving credit
facility.
Lundin Mining will also have the right to acquire up to an
additional 19% interest in Caserones for $350 million, which would bring total ownership
to a maximum of 70%. Lundin Mining will be permitted to exercise
the call option (in increments or its entirety) one time per
calendar quarter during the subsequent five-year period beginning
on the one year anniversary of the closing date.
Lundin Mining and JX shall each be entitled to a percentage of
the copper production from the Caserones mine equal to their
respective percentage share ownership.
The Acquisition has been unanimously approved by the Board of
Directors of both the Company and JX and is expected to close in
the third or fourth quarter 2023 subject to typical closing
conditions, including third-party and requisite regulatory
approvals. The transaction does not require shareholder approval of
either party.
Historical Estimates – April 20213
The historical estimates for Caserones are presented in the
table below.
|
|
|
|
|
|
|
Grade
|
|
Contained
Metal
|
Category
|
000's
Tonnes
|
Cu
%
|
Mo
%
|
|
Cu
Kt
|
Mo
Kt
|
Proven
|
419
|
0.35
|
|
|
|
|
Probable
|
473
|
0.31
|
|
|
|
|
Total
|
892
|
0.33
|
|
|
2,933
|
|
Measured
|
486
|
0.34
|
0.0129
|
|
1,659
|
63
|
Indicated
|
1,109
|
0.26
|
0.0097
|
|
2,924
|
108
|
M&I
|
1,595
|
0.29
|
0.0107
|
|
4,583
|
171
|
___________________________________________
|
3 Mineral
Resources are inclusive of Mineral Reserves.
|
The reported historical estimates above are based on the Caserones
block model prepared by Golder Associates S.A. (Golder) during
2018. The resource model update followed the 2017 infill drilling
campaign. The estimation of the grades was carried out by means of
Ordinary Kriging and using GIL (Geological Information Limit).
The historical estimates do not use categories as defined in CIM
Definition Standards. The Lumina Copper Annual Reports include an
annual "reserve statement" with no accompanying qualifying
attributes or supporting assumptions given. The most recent reserve
statement is from Lumina Copper's 2020 Annual Report and does not
provide the detailed assumptions for the estimation of its reported
"reserves" but does state "ore reserves are estimates of the amount
of ore that can be economically and legally extracted from the
company's mining properties". As Caserones is an active mining
operation with production history, the Company believes that the
historical estimates are relevant in that they provide a general
basis for establishing the mineralized material and historical
production statements. However, the historical estimates should not
be relied upon until verified by a qualified person. Compilation,
review, and independent verification by qualified persons of
geological, engineering, metallurgical, economic, and other data
that support ongoing mining operations will be required before the
historical estimate can be verified as current. This reserve
statement predates the Company's acquisition of its interest in
Caserones and is therefore considered to be a historical reserve
estimate. A qualified person has not done sufficient work to
classify these historical estimates as current Mineral Resources or
Mineral Reserves and Lundin Mining is not treating the historical
estimate as current Mineral Resources or Mineral Reserves.
Lundin Mining is currently undertaking the work to prepare
current estimates and expects to announce a current estimate and
file a technical report for Caserones on its SEDAR profile in due
course following this announcement. The technical report is
expected to contain current Mineral Resource and Mineral Reserve
estimates and other relevant information related to the Caserones
mine.
Advisors and Counsel
Scotiabank acted as financial advisor to Lundin Mining and
delivered an opinion to Lundin Mining's Board of Directors as to
the fairness, from a financial point of view, of the consideration
to be paid by Lundin Mining in the transaction. Lundin Mining
retained Cassels Brock &
Blackwell LLP as Canadian legal advisors, Paul, Weiss, Rifkind,
Wharton & Garrison LLP as US legal advisors, and Bofill Mir
Abogados and Bofill Escobar Silva Abogados as Chilean legal
advisors in connection with the transaction.
Technical Information
The qualified person for the scientific and technical
information contained herein is Jeremy Weyland, P.Eng.,
Director, Studies. Mr. Weyland, who is a "qualified person" as
defined under NI 43-101, has reviewed and approved the technical
information in this news release.
Conference Call and Webcast
The Company will hold a telephone conference call and webcast at
08:00 ET, 14:00 CET on
Tuesday, March 28, 2023. Conference call details are
provided below:
Call-in number for the conference call (North America): +1 416 764 8658
Call-in number for the conference call (North America Toll Free):
+1 888 886 7786
Call-in number for the conference call (Sweden): 0200899189
To view the live webcast presentation, please log on using this
direct link:
https://viavid.webcasts.com/starthere.jsp?ei=1606322&tp_key=eac9d5210b
The presentation slideshow will also be available in PDF format
for download from the Lundin Mining website www.lundinmining.com
before the conference call.
A replay of the telephone conference will be available after the
completion of the conference call until March 28, 2024.
Replay numbers:
North America: +1 877 674 7070
Internationally: +1 416 764 8692
The passcode for the replay is: 200446
A replay of the webcast will be available by clicking on the
direct link above.
About Lundin Mining
Lundin Mining is a diversified Canadian base metals mining
company with operations and projects in Argentina, Brazil, Chile, Portugal, Sweden and the
United States of America, primarily producing copper, zinc,
gold and nickel.
The information in this release is subject to the disclosure
requirements of Lundin Mining under the EU Market Abuse Regulation.
The information was submitted for publication, through the agency
of the contact persons set out below on March 27, 2023 at 21:30
Eastern Time.
Reconciliation of Non-GAAP
Measures
The Company uses certain performance measures in its analysis.
These performance measures have no standardized meaning within
generally accepted accounting principles under International
Financial Reporting Standards and, therefore, amounts presented may
not be comparable to similar data presented by other mining
companies.
Cash Cost and All-in Sustaining Cost can be reconciled to
Caserones' operating costs as follows:
|
Year ended December
31, 2022
|
Operation
|
Caserones
|
($000s, unless
otherwise noted)
|
Total
|
Total payable copper
(000 lbs)
|
267,409
|
Cost of
sales
|
$667,022
|
Add:
Administrative expenses
|
$113,497
|
Add:
Selling and distribution expenses
|
$30,296
|
Total
|
$810,815
|
Less:
Depreciation and other
|
($15,514)
|
Production
costs
|
$795,301
|
Less:
Capitalized tailings costs
|
($40,760)
|
Less:
Desalinated water
|
($34,600)
|
Less:
Exploration
|
($3,958)
|
Add:
Treatment and refining
|
$36,482
|
Deduct:
By-product credits
|
($157,494)
|
C1 cash cost
|
$594,971
|
C1 cash cost per
pound ($/lb)
|
$2.22
|
Add: Capitalized
tailings
|
$40,760
|
Add: Sustaining
capital
|
$43,650
|
All-in sustaining
cost
|
$679,381
|
AISC per pound
($/lb)
|
$2.54
|
Cautionary Statement on
Forward-Looking Information
Certain of the statements made and information contained
herein is "forward-looking information" within the meaning of
applicable Canadian securities laws. All statements other than
statements of historical facts included in this document constitute
forward-looking information, including but not limited to
statements regarding the Company's plans, prospects and business
strategies; statements with respect to the intentions of the
Company regarding the Acquisition and other strategic growth
opportunities, the anticipated timing and completion of the
Acquisition, the ability of Lundin Mining to complete the
transactions contemplated by the Acquisition, life of mine,
delivery of shareholder returns and value added by projects. Words
such as "believe", "expect", "anticipate", "contemplate", "target",
"plan", "goal", "aim", "intend", "continue", "budget", "estimate",
"may", "will", "can", "could", "should", "schedule" and similar
expressions identify forward-looking statements. Forward-looking
information is necessarily based upon various estimates and
assumptions including, without limitation, the expectations and
beliefs of management, including that the Company can access
financing, appropriate equipment and sufficient labour; assumed and
future price of copper, nickel, zinc, gold and other metals;
anticipated costs; ability to achieve goals; the prompt and
effective integration of acquisitions; that the political
environment in which the Company operates will continue to support
the development and operation of mining projects; and assumptions
related to the factors set forth below. While these factors and
assumptions are considered reasonable by Lundin Mining as at the
date of this document in light of management's experience and
perception of current conditions and expected developments, these
statements are inherently subject to significant business, economic
and competitive uncertainties and contingencies.
Known and unknown factors could cause actual results to
differ materially from those projected in the forward-looking
statements and undue reliance should not be placed on such
statements and information. Such factors include, but are not
limited to: global financial conditions, market volatility and
inflation, including pricing and availability of key supplies and
services; risks inherent in mining including but not limited to
risks to the environment, industrial accidents, catastrophic
equipment failures, unusual or unexpected geological formations or
unstable ground conditions, and natural phenomena such as
earthquakes, flooding or unusually severe weather; uninsurable
risks; risks associated with water rights, water supply
restrictions, the availability and access to water and water
management strategies; risks associated with environmental impact
studies, audits, investigations and compliance with remediation
plans; project financing risks, liquidity risks and limited
financial resources; volatility and fluctuations in metal and
commodity demand and prices; delays or the inability to obtain,
retain or comply with permits; significant reliance on a single
asset; reputation risks related to negative publicity with respect
to the Company or the mining industry in general; health and safety
risks; risks relating to the development of the Josemaria Project;
inability to attract and retain highly skilled employees; risks
associated with climate change; compliance with environmental,
health and safety laws and regulations; unavailable or inaccessible
infrastructure, infrastructure failures, and risks related to
ageing infrastructure; risks inherent in and/or associated with
operating in foreign countries and emerging markets, including with
respect to foreign exchange and capital controls; economic,
political and social instability and mining regime changes in the
Company's operating jurisdictions, including but not limited to
those related to permitting and approvals, environmental and
tailings management, labour, trade relations, and transportation;
risks relating to indebtedness; the inability to effectively
compete in the industry; risks associated with acquisitions and
related integration efforts, including the ability to achieve
anticipated benefits, unanticipated difficulties or expenditures
relating to integration and diversion of management time on
integration; changing taxation regimes; risks related to mine
closure activities, reclamation obligations, environmental
liabilities and closed and historical sites; reliance on key
personnel and reporting and oversight systems, as well as third
parties and consultants in foreign jurisdictions; information
technology and cybersecurity risks; risks associated with the
estimation of Mineral Resources and Mineral Reserves and the
geology, grade and continuity of mineral deposits including but not
limited to models relating thereto; actual ore mined and/or metal
recoveries varying from Mineral Resource and Mineral Reserve
estimates, estimates of grade, tonnage, dilution, mine plans and
metallurgical and other characteristics; ore processing efficiency;
community and stakeholder opposition; financial projections,
including estimates of future expenditures and cash costs, and
estimates of future production may not be reliable; enforcing legal
rights in foreign jurisdictions; environmental and regulatory risks
associated with the structural stability of waste rock dumps or
tailings storage facilities; activist shareholders and proxy
solicitation matters; risks relating to dilution; regulatory
investigations, enforcement, sanctions and/or related or other
litigation; risks relating to payment of dividends; counterparty
and customer concentration risks; the estimation of asset carrying
values; risks associated with the use of derivatives; relationships
with employees and contractors, and the potential for and effects
of labour disputes or other unanticipated difficulties with or
shortages of labour or interruptions in production; conflicts of
interest; existence of a significant shareholder; exchange rate
fluctuations; challenges or defects in title; internal controls;
compliance with foreign laws; potential for the allegation of fraud
and corruption involving the Company, its customers, suppliers or
employees, or the allegation of improper or discriminatory
employment practices, or human rights violations; the threat
associated with outbreaks of viruses and infectious diseases; risks
relating to minor elements contained in concentrate products; and
other risks and uncertainties, including but not limited to those
described in the "Risk and Uncertainties" section of the annual
information form and the "Managing Risks" section of the Company's
MD&A for the year ended December 31,
2022, which are available on SEDAR at www.sedar.com under
the Company's profile. All of the forward-looking information made
in this document are qualified by these cautionary statements.
Although the Company has attempted to identify important factors
that could cause actual results to differ materially from those
contained in forward-looking information, there may be other
factors that cause results not to be as anticipated, estimated,
forecast or intended and readers are cautioned that the foregoing
list is not exhaustive of all factors and assumptions which may
have been used. Should one or more of these risks and uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in
forward-looking information. Accordingly, there can be no assurance
that forward-looking information will prove to be accurate and
forward-looking information is not a guarantee of future
performance. Readers are advised not to place undue reliance on
forward-looking information. The forward-looking information
contained herein speaks only as of the date of this document. The
Company disclaims any intention or obligation to update or revise
forward–looking information or to explain any
material difference between such and subsequent actual events,
except as required by applicable law.
SOURCE Lundin Mining Corporation